Germany Toughens Rules on Foreign Buyouts in Strategic Sectors

Germany's cabinet agreed Wednesday to tighten scrutiny on takeovers of companies in strategic industries by buyers outside the EU, the Economy Ministry said, reacting to Europe-wide disquiet over Chinese takeovers.

New regulations will allow Berlin more time to probe takeover bids, especially in sectors affecting critical infrastructure, and extend the range of deals eligible for examination by the authorities.

"We remain one of the most open economies in the world, but we also have an eye on fair competition. We owe that to our companies," Economy Minister Brigitte Zypries said in a statement.

"In future, reporting requirements and more time to examine deals will provide more protection and reciprocity for companies in critical infrastructure."

The new ruling extends takeover probes to include companies providing services or software to strategic sectors including electricity grids, nuclear power plants, water supplies, telecoms networks, hospitals and airports.

More defense companies manufacturing or developing "key technologies" are also covered than under previous rules.

It doubles the time civil servants have to probe proposed deals by non-European Union or European Free Trade Association (EFTA) buyers from two to four months.

And it makes clear that "indirect" takeovers -- where a non-EU firm creates a company within European borders as a vehicle for a buyout -- will also be subject to examination.

In its statement, the Economy Ministry said Germany would work also with France and Italy to push for similar changes to EU law.

Growing Disquiet

Disquiet about a wave of foreign acquisitions by Chinese companies has been growing in Berlin since household goods maker Midea took over industrial robotics firm Kuka last year.

With robots becoming increasingly critical in the manufacturing sector -- which forms the backbone of Europe's largest economy -- German leaders were alarmed to see valuable knowhow being transferred abroad.

That decision was based on U.S. concerns over Aixtron's products, which United States intelligence services warned could have military applications.

And concerns extended beyond China after U.S.-based Tesla Motors took over Grohmann Engineering.

The firm, previously a supplier to German carmaking behemoths like BMW and Daimler, redirected most of its machine tools output to Tesla after the acquisition.

In recent weeks, Chancellor Angela Merkel has drawn closer to French President Emmanuel Macron, who has called for increased protection against non-EU takeovers.

Macron failed to convince fellow EU leaders to grant Brussels more takeover-blocking powers at a meeting in late June.

But the German leader took his side in a magazine interview a week later, saying she wanted to protect "strategic" EU industries and for Europe to "defend its influence and above all to speak with one voice" to Beijing.